Note 6 - Accounting for Certain Loans Acquired

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Accounting for Certain Loans and Debt Securities Acquired in Transfer Disclosure [Text Block]

Note

6:

Accounting for Certain Loans Acquired

The Company acquired loans during the quarter ended

June 30, 2018. 

At acquisition, certain acquired loans evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would

not

be collected.

Loans purchased with evidence of credit deterioration since origination and for which it is probable that all contractually required payments will

not

be collected are considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date

may

include information such as past-due and nonaccrual status, borrower credit scores and recent loan to value percentages. Purchased credit impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC

310

-

30

) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is

not

carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds.

The carrying amount of those loans is included in the balance sheet amounts of loans receivable at

June 30, 2018.

The amount of these loans is shown below:

	June 30,
	2018
	(In Thousands)
Real estate - commercial	$	6,023
Commercial loans		2,174
Consumer and other loans		349
Outstanding balance	$	8,546
Carrying amount, net of fair value adjustment of $2,581 at June 30, 2018	$	5,965

Accretable yield, or income expected to be collected, is as follows:

	Three months ended
	June 30,
	2018
	(In Thousands)
Balance at beginning of period	$	238
Additions		-
Accretion		(34	)
Reclassification from nonaccretable difference		-
Disposals		-
Balance at end of period	$	204

During the

three

months ended

June 30, 2018,

the Company did

not

increase or reverse the allowance for loan losses related to these purchased credit impaired loans.